Cheap fares but passengers get limited services

I. Christianto, Contributor, Jakarta

During an aerospace or aviation show, flying enthusiasts enjoy jet fighters and other aircraft taking off, soaring and playfully chasing each other through the sky.

Similar acrobatic maneuvers are apparent in the price war between budget airlines.

Low-fare air carriers have been popular for some time internationally, as well as in Indonesia, a country considered to be one of the most prospective markets for the air transportation business.

Call them what you will: low-cost, no-frills, discount, best-deal, bargain, cut-rate, cheap-fare or budget airlines... whatever takes your fancy.

Travelers can expect incredibly low-priced flights to an increasing number of destinations across the archipelago, including the popular and most profitable routes.

Competition in domestic-flight services will be fiercer from day to day, especially with the operation of several new budget airlines later this year. For many would-be fliers these new airlines are a nice alternative to the bus, train or sea travel.

Indonesia's aviation sector has never been so good. In its gloomiest period, the industry comprised of a limited number of airlines, some plagued by financial problems. Now, there are dozens of Indonesian air carriers. Compared to the old players, these new companies are not only efficient but also more creative.

Considering its size, location, huge population and growing middle class, Indonesia is indeed an ideal market.

Indonesia expects to see tremendous growth in its domestic air passengers in the coming years. Domestic air passengers totaled about 17.46 million in 2003, up by 43.19 percent from 12.1 million in 2002. After a significant drop during 1997-1999, the figure gradually increased to some 7.6 million passengers in 2000, and to 9.2 million in 2001. There was another increase to 12.1 million in 2002. Domestic air passengers are expected to surge to 20 million this year.

Recent growth rates are much better than figures for the rest of Asia and, indeed, the world. According to the International Air Transport Association (IATA), Asian airline-passenger traffic will rebound by 14 percent this year -- after declining 9.4 percent in 2003 due to the devastating fallout from the outbreak of severe acute respiratory syndrome (SARS).

The projected increase in Asia is much higher than the estimated growth of global-passenger traffic, which is expected to reach 7 percent this year, compared to 2.4 percent in 2003.

Low fares offered by new budget carriers have contributed to the promising growth rate in Indonesia.

The projected figure of 20 million air passengers this year is still fairly small when compared with the some 210-million population of Indonesia. No wonder that more companies are planning to enter the air transportation business here.

The Indonesian National Air Carrier Association (INACA) estimates that the total fleets of airlines will increase by 50 percent this year, creating a supply of between 60,000 and 70,000 seats per day, while the number of passengers is predicted to rise to around 55,000 per day.

Based on a rough supply-and-demand figure, this sector will remain promising. Competition among domestic carriers will, however, be fiercer. Lion Air has announced its plan to reduce fares by between 15 percent and 30 percent this year.

In the early 1990s, airfares offered by incumbent airlines such as Bouraq, Dirgantara, Garuda, Merpati, Mandala and Pelita were strictly controlled by the government.

With the increase in domestic airline operators, sharp competition cannot be avoided. There are more than 25 airlines operating, or intending to operate. They include Lion Air, Jatayu, Star, Kartika, Batavia, Paradise, Riau, and Seulawah, Trigana, Xpressair, Adam, Sriwijaya, Wings, Deraya, Lorena and Efata. Due to this rivalry, sometimes ticket prices for the same route can change twice within a week.

Usually, cheap fares carry many restriction, for example, validity period (usually a cheap return ticket is only valid for seven days after the departure date) and schedule (at night or very early in the morning).

With such restrictions and limited services, low-cost airlines are able to offer airfares up to 75 percent cheaper than those of regular airlines.

The no-frills concept, which has been widely accepted in the U.S. and Europe, has also proven to be a winner in Indonesia.

The fares offered by budget airlines could be as low as one- third that of regular tickets. In the first week of March, for example, a one-way Jakarta-Surabaya ticket is about Rp 180,000 (about US$21), Jakarta-Denpasar Rp 260,000, Jakarta-Medan Rp 295,000 and Jakarta-Pontianak Rp 215,000. In comparison, the Jakarta-Surabaya ticket offered by an executive train is about Rp 220,000.

Some budget airlines, particularly those serving short-haul routes, scrap the frills offered by standard carriers, such as free meals, beverages, wine and in-flight entertainment, including magazines, movies and music. Instead, some budget airlines are charging passengers for these onboard services.

A leading and successful no-frills airlines in Europe, Ryanair, even plans to get rid of "non-essential" facilities such as reclining seats, head rests, seat pockets and window blinds. It will also switch to leather upholstery, as these last longer and are easy to clean. To encourage passengers to carry cabin baggage, it might also charge to check in luggage.

While airlines are allowed the liberty to select their onboard amenities, they are required to equip flights with seat belts, environment control systems, lights and doors. Another major low- cost carrier in Europe, EasyJet, has even cut the number of toilets on its Boeing 737s from three to two.

It is not impossible that budget airlines in Indonesia will also follow in stead, as serving passengers with only cabin baggage will reduce handling costs and scrapping "non-essential" facilities will reduce maintenance costs, while cutting down on toilet stalls will provide more space for additional seats -- meaning increased revenue.

This is all about cost cutting which, in turn, should extend savings to passengers.

Indonesian budget airlines should, however, be fair and open about their low-cost services. Airlines must, for example, inform passengers that the flight has limited services, so they will not be disappointed when the usual services are not forthcoming. The problem is, only a few customers fathom that the airlines they are boarding are low-cost, no-frills, discount, best deal, bargain, cut-rate, cheap fare or budget carriers.

As most of these new airlines do not have any spare aircraft and also do not provide connecting flights with other airlines, they should also inform passengers that a delay might be expected.

Budget airlines must also convince customers that low fares do not always mean low quality -- for example, the absence of smiling, friendly staff -- or low safety, which is always number one.

Most of the new airlines, which use a single aircraft family, the Boeing 737, will continue to offer cheaper fares due to advantages such as more economical leasing arrangements and fuel prices.

It is useless for the government to try and control air fares, as in setting minimum and maximum price limits, as industry players will ignore them, as usual. Regulators can merely set flight classifications, akin to starred hotel ratings, based on price, amenities and facilities. It is also important to consider the travel time of budget fares, that is, a two-hour flight time is acceptable for cheap fares.

With proper information on budget airlines, more people will hopefully be humming, I'm leaving on a jet plane...